Questions

Q. What was filed by the Commissioner of Insurance on June 29th?

A. The Commissioner filed a petition seeking an order of liquidation for Trust Insurance Company, as well as her appointment as Permanent Receiver for both Trust Insurance Company and Trust Assurance Company. She has not sought to liquidate Trust Assurance Company. The Commissioner has also requested that the Court terminate the special administrative expense priority as to claims which occur on or after the date of the proposed order of liquidation (August 2, 2000).

Q. Why did the Commissioner take this step?

A. The Commissioner has concluded that Trust Insurance Company is insolvent, and must be liquidated. Although she concluded that Trust Assurance is not insolvent, it has no independent operational structure from that of Trust Insurance. Therefore, its operation outside of receivership would be hazardous to its policyholders, creditors, and to the public.

Q. What will happen next?

A. The supervising Court will schedule a hearing on the Commissioner's petition, likely during the month of July. Legal notices of the hearing will be published in newspapers in the states in which Trust Insurance does business.

Q. What happens in the meantime, before the Court acts?

A. All claims under policies issued by Trust Assurance will continue to be paid in the normal course. All claims under policies issued by Trust Insurance with accident dates on and after February 10, 2000 will also continue to be paid in the normal course, since these losses were afforded administrative expense priority in the Court's original receivership order. As of June 29th, Trust Insurance will cease making payments on losses with accident dates prior to February 10, 2000. No further adjustment of these claims would take place pending the Court's action.

Q. When is the Court likely to act?

A. The Commissioner has requested that the Court enter the liquidation order effective as of August 2, 2000. This makes guaranty fund coverage available for losses occurring until the last of the policies of insurance issued by Trust Insurance is canceled effective at 12:01 a.m. on October 1, 2000.

Q. What will happen if the Court grants the Commissioner's petition?

A. If the Court finds that Trust Insurance is insolvent and orders its liquidation, the Massachusetts Insurers Insolvency Fund ("MIIF") and similar guaranty funds in other states will be triggered. The guaranty funds would assume responsibility for adjusting and paying claims under policies of insurance issued by Trust Insurance with accident dates prior to February 10, 2000, as well as claims with accident dates on and after the date of the liquidation order (proposed to be August 2, 2000).

Q. What impact will the trigger of the guaranty funds have on pending claims?

A. MIIF would assume responsibility for the vast majority of pending claims (those with accident dates prior to February 10, 2000, or on and after the date of the liquidation order) under policies of insurance issued by Trust Insurance. MIIF and the guaranty funds in other states are only responsible for "covered claims", as defined in their respective statutes. In general, "covered claims" are limited to $300,000 per occurrence. In addition, guaranty funds typically do not pay claims for which there is other available insurance (such as the uninsured motorist coverage of the injured claimant).

Q. If the Court enters the liquidation order on the date requested, which claims would the staff of Trust Insurance continue to handle?

A. All claims under policies of insurance issued by Trust Assurance, regardless of accident date, would continue to be handled by the staff of Trust. In addition, all claims under policies of insurance issued by Trust Insurance, with accident dates from February 10, 2000 through August 1, 2000 (inclusive), would continue to be handled by the staff of Trust.

Q. What will happen to return premiums on canceled policies?

A. Both Trust Insurance and Trust Assurance will continue to return premiums due upon the cancellation of policies, in the normal course.

Q. Will there be staff reductions at Trust?

A. Yes. Each employee will be given a projected "stay date", which is the date upon which it is expected that their particular function will no longer be needed. The earliest such date will be August 31, 2000. If the employee works through their individual "stay date", they will receive severance pay and the full amount of the retention bonus (announced in March) accrued through the "stay date". It is possible that an individual's "stay date" will be extended, in which case they could remain employed and continue to accrue the retention bonus. Payment for all accrued but unused vacation time will also be made at the time of the termination of employment.